Percentage, Specific or Mining Taxes Paid on Domestically Manufactured or Imported Raw Materials, Parts, Accessories or Other Articles Forming Part of Finished Products Sold to AFPCES may be Claimed as Tax Credits

July 24, 1980 BIR RULING NO. 108-80 S.C. Johnson & Son, Inc. P. O. Box 505 Commercial Center Makati, Metro Manila Attention: Mr . Alfredo M . Escueta, Jr . Treasurer Gentlemen : This refers to your letter dated March 11, 1980 requesting confirmation that the sales tax paid on materials used in the manufacture of articles sold to AFPCES, a tax-exempt entity can be claimed as a tax credit. In reply, please be informed that Section 6 of Revenue Regulations No. 7-76, as amended by Revenue Regulations No. 2-80 provides, among others, as follows: "Sec. 6. In filing his quarterly percentage tax return, the manufacturer or producer selling articles or commodities to AFPCES shall exclude from his total gross sales subject to tax the sales made to AFPCES during the quarter. The tax free sales to AFPCES shall, however, be indicated in the return by means of a footnote stating the amount of sales and the percentage, specific or mining taxes paid on the raw materials, parts, accessories or other articles forming part of the finished product sold. "Any percentage, specific or mining tax paid on domestically manufactured or imported raw materials, parts, accessories or other articles forming part of the finished product sold to AFPCES may be claimed as a tax credit by the manufacturer or producer upon proper application provided that the amount of the tax paid on the raw material, part, accessory or other article is indicated as a separate from in the sales invoices." It is very clear from the foregoing that you can claim a tax credit on the taxes paid on the raw materials which you used in the manufacture of articles sold tax free to the AFPCES. cdt Very truly yours, RUBEN B. ANCHETA Acting Commissioner